Problem:
C LLC is a UAE resident company. C LLC acquired F LLC (another UAE resident company) on 31 March 2026. F LLC wholly owns Z LLC (another UAE resident company). C LLC owns 100% of the share capital and holds 100% of the voting rights of F LLC. FLLC owns 100% of the share capital and holds 100% of the voting rights of Z LLC. All of the companies use the same accounting standards and have the same Financial Year.
Although C LLC does not directly own any share capital or hold any voting rights in Z LLC, it does so indirectly through its ownership of Z LLC's owner, F LLC. C LLC, therefore, meets the ownership requirements of F LLC and Z LLC in order to form a Tax Group, as C LLC indirectly owns over 95% of the share capital and voting rights of both F LLC and, by extension, Z LLC. CLLC (as the Parent Company), F LLC and Z LLC made an application to form a Tax Group, effective from the Tax Period beginning 1 September 2026.
The application to form a Tax Group was approved by the FTA. At the end of the Tax Group's first Tax Period on 31 August 2027, each group company's Accounting Income for the year, before consolidation, is as follows:
CLLC AED 10,000,000
FLLC AED 8,000,000
ZLLC AED 9,000,000
During that period, F LLC and Z LLC received dividends from UAE resident companies totalling AED 3,000,000, and C LLC spent AED 250,000 on client entertainment. C LLC had AED 5,500,000 of brought forward Tax Losses from its previous Tax Period (1 September 2025 - 31 August 2026).
Required:
a) Calculate Tax Group's Taxable Income which should be reported to the FTA for the Tax Period ending on 31 August 2027. Need Assignment Help?
b) Assume on 4 November 2027, C LLC sold 50% of its shares in F LLC. What would happen to the TAX Group?